Do You Understand How to Protect Stocks-Both Declines & Upside Surprises? Read On!

March 11 2022 Option Professor Opinions & Observations

Well another week another whipsaw as the SPX started the week ABOVE 4300 the dropped to UNDER 4160 the rallied to 4300 and went home Friday with its tail between its legs at 4200. This is not surprising to us as we have said that 2022 was a REVERSION to the MEAN year which had levels on SPX around 4400 then 3850 then 3600. We are OVERSOLD basis a VIX that almost hit 40 so throw back rallies on any news highlight algos & illiquidity. The BEST place to be since we said STOCKS TOPPED in 2021 and BONDS topped in 2020 would be rolling a SHORT TERM LADDER in Treasuries (0-24 mos) and put stock exposure to ENERGY & METALS….but the financial industry would never be so bold The one thing we brought to readers attention was the GROWTH to VALUE Ratio which TOPPED in December 2021 and since that time relative performance has favored value. If we get a dovish Fed statement & ceasefire…growth may spike We have INDICATORS on our SHORT TERM (1 month) charts that when they turn; we will respect that but so far no sale.

Inflation is global as Italy is looking at 40% and Brazil 10%+ as examples. Can the Fed stop STRUCTURAL INFLATION with 1/4 point hikes? We may rally after the Fed , End of the Quarter (Q1) book squaring, and frontrunning earnings in April; but getting ABOVE both SPX 4400 and 4600 RESISTENCE may take a lot of things breaking very well; we’re ready!

Here’s your questions….Will the consumer (70% of economic growth) keep spending? Will the Fed get to 1% Fed Funds by June (3 months+)? Will Q1 earnings stay strong? Will valuations tighten further? Is the SPX 4100 low AND the VIX 39 high the end of it OR is there a CAPITUALTION to SPX 3600-3800 with the VIX spike thru 40/put call ratios spike?

Yellen’s talking about persistent inflation and if the Fed does basic math; interest rates could move more than is priced in and growth could be slower than forecast. The most POPULAR theme is that the 2nd half of the year is the land of milk & honey as we re-open, supply chains loosen, Russia’s resolved, oil comes to market, inflation slows-sounds good Since there are more accounts trading stocks than ever; most people wish to believe this dream of joy turns into reality.

We SEE our LONG TERM CHARTS & INDICATORS on SPX are still UNDER the current market prices and are RISING which is BULLISH albeit the support from those indicators are as much as 10% to 15% UNDER current SPX prices. We believe COMMODITIES will TOP in 2022 and we monitor the GOLDMAN SACHS COMMODITY INDEX high points from 2008 to see if we TEST or slightly EXCEED and then turn down as additional supplies of oil, grains & metals materialize. People thought it crazy when we said in March 2020 that we may never see those RATES again much like 40 years earlier the sharps said we’d never see a 16% long term Treasury YIELDS again. When people said VALUATIONS in 2001 were off the charts UNSUSTAINABLE; they were scorned like those who said in 2021 (20 yrs later) it was BUBBLE REDUX


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